Nike is the largest sportswear company in the world, creating
shoes, jerseys, and other apparel for just
about every sport one can imagine – golf,
tennis, basketball, wrestling, swimming,
soccer … the list goes on and on. It’s a
huge business – one that generated $16.3
billion in revenues last year and employed
nearly 800,000 people in Nike contract
factories in Indonesia, China, Vietnam,
and other low-wage countries.

The wages and working conditions of
Nike’s contract employees have been the
source of a great deal of public controversy
for more than a decade. And they are
still the issues that consume much of Hannah
Jones’ time. Jones is Nike’s vice president
of corporate responsibility, and one
of her duties is to make sure that Nike’s
contract manufacturers adhere to the company’s
increasingly strict labor standards.
It’s a challenge made all the more difficult
because the push to keep costs and consumer
prices low is one of the few things
that doesn’t change in the global apparel
industry.

One of the things that does change
continually is what goes in and out of
fashion. The apparel industry likes it
that way because it creates a constant
demand for new products. But it also
poses a challenge for Nike as the company
attempts to reduce its environmental footprint
and become greener. This is another
one of Jones’ areas of responsibility, one
she calls “recycle, reduce, reuse.” One of
the solutions is to use more environmentally
friendly materials in Nike’s products.
Another is to recycle old sneakers
and use them in playground surfaces.
These are just a couple of examples of
the creative solutions that Nike is coming
up with as it strives to be more environmentally
and socially responsible.

JAMES A. PHILLS JR.: Can you tell
us about the evolution of corporate
social responsibility (CSR) at Nike,
in particular the shift from a “do
no wrong” ethos to the aspiration
expressed in your current CSR
report to “contribute to positive
social change”?

HANNAH JONES: In the early ’90s
Nike moved into the center of a
major storm around the issue of
sweatshops and working conditions
in global supply chains. We were one
of the first brands to be targeted by
NGOs in their effort to raise public
awareness around these issues. It
required us to focus on risk management
and reputation management
because that’s what was under fire.
It has been a huge change for Nike to
go from that early era of firefighting
to our current approach of engaging
with external stakeholders in dialogue,
consensus, and sometimes on-the-
ground partnerships with even
our harshest critics. It was through
opening up the company and listening,
learning, and engaging that we
began to see how the social and environmental
issues involved challenges
way beyond Nike. And it became
clear that the only way to solve those
problems was through multi-stakeholder
partnerships.

When you say multi-stakeholder
partnerships, are you referring to
the business, government, and NGO
sectors, or are you referring to an
even broader range of Nike stakeholders?

Both. When you look at issues like
poverty and climate change, and you
think about how the world will move
toward more sustained action, you
realize that every single individual
needs to think about his or her role in
effecting change. In order to solve
these complex problems we’re going
to need the expertise of NGOs, business,
and government – all working
together. I also think that there’s a
broader conversation about how we
in the business world engage consumers
and society at large.

What was the inflection point for
the shift in how Nike approaches
these issues?

About two and a half years ago we
started trying to challenge ourselves
as a team to think about how CSR
could be a source of innovation and
growth to the company in new products,
new services, and new markets,
while also bringing a return on investment
not just to our shareholders, but
also to the environment and socially.
That was a different approach from
thinking about CSR as a policing
agency.

We believe that applying the DNA
of business innovation to solving
social and environmental problems is
very powerful. We now talk a lot
about the art of social innovation and
how we can refine and deepen that
art. So, for example, we started holding
quarterly social innovation labs
that focus on applying thinking about
innovation. It’s not about solving a
problem; it’s about the art of solving
problems. Ultimately, we have come
to talk about Nike’s desire to innovate
for a better world.

Nike’s recent CSR report identifies
three areas of focus: improving
working conditions at factories that
are part of your supply chain; minimizing
your global environmental
footprint; and using your brand to
provide excluded youth with access
to the benefits of sport. What led
you to select these three areas?

We started the process by looking at
Nike’s impact on the world. If you
think about what Nike does, we make
and market a lot of stuff all around
the world. So if you think about our
social impact, it’s clear that our primary
responsibility is to have a positive
impact on the 800,000 to 1 million
people who work within the global
supply chain that Nike has to produce
its products.

About 80 percent of the supply
chain workforce is employed in contract
factories operated by other companies.
On average, the workers are
18- to 24-year-old women, many of
whom are the first women in their
families and their communities to
work in the formal economy and have
economic independence. So we have a
huge opportunity to affect these
women and improve their working
conditions, and in doing so potentially
to have a multiplier effect on their
communities.

But these women are often vulnerable.
They may have migrated from
their home to a new location where
they don’t have a community of support
around them, and they’re often
working in countries where the rule
of law is poorly enforced. So these
women have to be our primary concern.
Even though this is not our supply
chain in the sense that we don’t
own any of the factories, we feel that
we have the ability and the responsibility
to try to influence the whole
industry.

What about Nike’s other two areas
of focus?

If you look at Nike from an environmental
perspective, we produce a lot
of products. We have to use a lot of
natural resources and energy in order
to make the product and transport it
to the consumer. Our focus is on how
we reduce waste and how we use
innovation to create closed loop
approaches – recycle, reduce, reuse –
to reduce our environmental footprint. Something that we’ve also been
doing for a decade is reducing our carbon
emissions and looking at how we
can move toward climate neutrality.

Our third focus is on excluded
youth. We tried to go back to recognizing
the passion that drives our
employees and this company, which is
sport and the power that sport has to
unleash potential and to foster selfesteem,
leadership, and health. So we
focused our community giving predominantly
around sport and the role
it can play in community building and
helping excluded young people.

CSR is often talked about as a winwin
situation. But the real difficulties
arise when there are trade-offs
between financial and social objectives.
Have you encountered these
trade-offs, and if so, how do you
deal with them?

There absolutely are trade-offs. The
difficulty arises when you get down to
the middle-management level where
people often think about their realm
of responsibility and success vs. that
of the company as a whole. Sometimes
change needs to happen in a different
part of the company or supply
chain from where success will eventually
be felt. The challenge is how you
get people to see the bigger picture
and how you create incentives so that
people participate willingly. One of
the challenges is that people often
don’t have visibility into the entire
supply chain so that they can understand
where the costs, investments,
and returns are.

I’ll give you an example. We did a
lot of work to understand the causes
of excessive overtime in factories. We
discovered that one of the root causes
is that designers are late handing their
product designs over to the factory.
We all know why that happens –
they’re busy, someone swoops in and
makes a last-minute change, and
before you know it they’re two weeks
late in handing the design over to the
factory. But the deadlines of the factory
remain the same, and the person
who gets squeezed is the worker who
is asked to do excessive overtime
hours in order to complete the task.
Simply explaining this to our design
community has been an incredibly
powerful conversation, because they
had no idea what the downstream
impact of their behavior was.

Nike has been given credit for its
openness about problems and for
acknowledging areas where its
social and environmental performance
could be better. Was this a
difficult thing to do?

Initially, the idea of being transparent
about our own problems was counterintuitive,
as it is to most people
and most organizations. I was
directly responsible for the CR report
in 2004, in which we announced that
we were disclosing our factory supply
chain locations and where we
tried to be candid about all of the
challenges we saw, which was a first
in the industry.

Disclosing these things was
absolutely counterintuitive, because
it was deemed a competitive advantage
to remain secret about your supply
chain. I remember this vividly,
because our vice president for sourcing
and I went to Phil Knight and the
board and said: “Listen, if we do this,
we have an opportunity to get the
ball rolling on creating overall transparency
about supply chains. It could
make monitoring way more effective
and help us all focus our energies on
remediation and system change. Are
you willing to take the risk?”

The reason they were willing to do
it is that as early as 1998 there was an
absolute mental model shift within
the Nike team, right up to the chairman
and board of directors, which
was “We don’t want to do this to get
the monkey off our back. We want to
do this to take a leadership position in
addressing these issues and change the
industry.” And if you’re going to
change the industry you have to start
by getting people to have an honest,
fact-based conversation about what
the issues are. Unless you do that,
how can any of us come up with real
solutions?

Some critics dismiss CSR as simply
public relations or spin. To what
extent does this criticism have
merit?

Any company that thinks it can do
CSR for PR or for spin is kidding itself,
because it’s a very transparent world
out there. There’s the Internet, and
there are NGOs that are very active
and very, very smart at thinking
through and understanding what
these issues are. Unless you are walking
the talk, you’re better off not talking
at all.

What two pieces of advice would
you offer to senior executives about
how to have a more positive impact
on social and environmental issues?

First, it’s crucial to develop a deep
understanding of your company’s
business model, and to move CSR
beyond being a function and toward
being an integral part of every business
unit. One does that by positioning
CSR as a source of potential innovation
and growth and by inspiring
people, as opposed to operating as a
policing or ethical oversight function.
Partnering with various parts of the
business gets you into far more conversations
than the latter.

Second, getting CEO and board
leadership is absolutely crucial. None
of this happens without the CEO taking
a vocal and sustained leadership
position around these issues. People
will take their lead from the leader,
and when your leader says, “I
empower you to integrate CSR into
what you do as your day-to-day job,
and I will reward you for doing it,”
then you will have a tsunami on your
hands. In a good way, I might add.

Are you optimistic about the future
of CSR and transparency in large
corporations?

Yes, I am very optimistic. In the early
’90s we were one of the few corporate
responsibility teams. Now it’s
almost a requirement. I see more
change, activism, and leadership on
this than I’ve ever seen.

COMMENTS

It is unfortunate that Nike is picked out for criticism and all the good they have done goes unnoticed. So many companies have equal or greater blame. At least is it is a shot across the bow for all.
As a company dealing with styles, trends and fads of all kinds, excess inventory must be a constant problem. What do they do with it? Recycle is an eventual inevitable but it can be delayed and reduced if they would donate their products directly to non-profits. Whether it be thousands of shoes, gadgets and clothing, in kind donations can be converted to cash when it is impractical to donate different styles and sizes. The program is available now and neither Nike or the non-profit has to lift a finger.
We shall see who will follow up to make it happen.
Best,
gene

My wife who has been appointed by the US State Dept. to be the English Language Fellow to Namibia at Polytechnic University are from Eugene, Oregon. We would like learn if there are any surplus Nike products that we could give to scholarship students in Namibia.

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